Whenever it makes financial sense to do so.
Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here are some of the reasons people refinance their home loan.
Mortgage refinancing reason: lower rate
The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.
Mortgage refinancing reason: less features
Many people are paying annual package fees ranging from $350-$400 per year for features that they just don’t utilise. Lenders offer competitively priced home loans that do not have any on-going fees, and whilst some of these more basic type loans don’t offer the full ‘bells and whistles’, they still provide you with the most important feature you need, which is the flexibility to make extra repayments. Most of these ‘no frills’ loans also provide you with a redraw feature that allows you to access any extra money you’ve paid into your loan.
Mortgage refinancing reason: home equity
Over time, homes generally appreciate in value whilst the amount owing under the mortgage has decreased through regular repayments. This combination results in an increase in equity in the home. It’s this equity that home owners can tap into to enable them to undertake home renovations or improvements, upgrade the family car, or even gear into an investment property purchase or other income producing assets such as shares to help them build wealth. During this process of establishing an equity loan is another common time when clients review the merits of staying with their current lender or seeking a better deal elsewhere.
Mortgage refinancing reason: debt consolidation
Some people find they have accumulated personal debt through car loans, personal loans and/or credit cards. If there is sufficient equity in their home, consolidating all their debts into the mortgage could be something to consider, especially if all the various repayments have become a financial burden. There are some pros and cons with this approach, and each clients situation should be assessed individually. In conjunction with a debt consolidation, a review of the current mortgage provider is a good opportunity to see if there are better loan opportunities available from other lenders.
Regardless of your situation, it pays to regularly review your financial position with a credible mortgage adviser to get some smart mortgage advice on your options. So if you’d like to take me up on that offer, I’d love to hear from you.
Cairns Mortgage Broker – Jason Thomson is a Mortgage Adviser and Finance Broker based in Cairns with clients all around Australia. Client reviews featured on his website prove that Jason is a trusted industry professional, facilitating great outcomes for his clients. Using his wealth of experience in financial services, he thrives on delivering superior service. Jason is very approachable and is always looking for new clients to help in the often confusing world of finance and property. Offering a no fee service, you’ve got nothing to lose by having an obligation free chat with Jason today.